Publication Date: 29 April 2011 ID Number: G00212602
2011 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and f unds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For f urther information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity" on its website, http://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp Market Share Analysis: Retail Vertical-Specific Software, Worldwide, 2010 Marianne D'Aquila, Jeffrey Roster The market for retail vertical-specific software grew 5% from 2009 to 2010, driven by highly scrutinized strategic investments by retailers. Cost containment initiatives and frozen budgets in response to the global economic recession gave way to cautious spending, based on intense ROI scrutiny. North America still dominates the majority of retail software spending, but increased attention is being placed on the double-digit growth seen in emerging markets, such as Latin America. While, no one vendor holds more than a 4% share of worldwide spending in this highly fragmented market, The largest vendors, by revenue (SAP, Oracle, Retalix, SAS and NCR), held stable market shares from 2009 through 2010. Key Findings Retail vertical-specific software vendor revenue has shown signs of overall growth and recovery, with total software revenue increasing 5% annually to a worldwide market size of $8 billion in 2010, up from $7.6 billion in 2009. North America continued to garner the largest market share (49%%), but small emerging markets, such as Latin America with 5.6% market share and double-digit growth (15%), are attracting the attention of vendors. Retail vertical-specific software is a highly fragmented market, with no one vendor dominating the market. There was no notable shift in overall total market share among the top five vendors in 2010. While Gartner has tracked many acquisitions in the retail vertical -specific marketplace since 2004, the level of merger and acquisition (M&A) activity slowed for the top five vendors in 2010.
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TABLE OF CONTENTS Market Share Data ....................................................................................................................... 3 Analysis ....................................................................................................................................... 3 Overall Market Segment Performance Analysis ................................................................ 3 Top Vendors Analyzed ..................................................................................................... 4 SAP Continues to Leverage Its End-to-End Support of Retailer's Ecosystems ..... 4 Oracle's Retail Software Drives Growth in 2010 ................................................... 4 Retalix Penetration of High-Volume High-Complexity FMCG Contributes to Industry Growth ................................................................................................... 5 SAS Experiences Double-Digit Revenue Growth for Vertical-Specific Software .... 5 NCR's Growth of 4.5% Results in Expanded Efforts in Latin America ................... 5 Mergers and Acquisitions ................................................................................................. 6 Recommended Reading ............................................................................................................... 6
LIST OF TABLES Table 1. Top Five Retail Vertical-Specific Software Vendors, Worldwide, 2009-2010 .................... 3 Table 2. Top Retail Vertical-Specific Software by Region, 2009-2010 ........................................... 3 Table 3. M&As for the Top Five Retail Vertical-Specific Software Vendors, 2010 .......................... 6
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MARKET SHARE DATA Table 1 provides revenue for the top five retail vertical-specific software vendors, and Table 2 shows retail vertical-specific software spending by region. Table 1. Top Five Retail Vertical-Specific Software Vendors, Worldwide, 2009-2010 2009 Rank 2010 Rank Company 2009 2010 2010 Growth (%) 2010 Share (%) 1 1 SAP 230 253 10.0 3.1 2 2 Oracle 203 221 8.9 2.7 3 3 Retalix 78 86 10.3 1.1 4 4 NCR 66 69 4.5 0.9 5 5 SAS 27 30 12.2 0.4 Others 7073 7431 5.1 91.8 Total 7,677 8,090 5.4 100 Source: Gartner (April 2011) Table 2. Top Retail Vertical-Specific Software by Region, 2009-2010 Region 2009 2010 2010 Growth (%) 2010 Share (%) Asia/Pacific 572 618 8.0 7.6 Eastern Europe 169 173 2.4 2.1 Japan 813 825 1.5 10.2 Latin America 392 451 15.1 5.6 Middle East and Africa 126 132 4.8 1.6 North America 3,792 3,986 5.1 49.3 Western Europe 1,813 1,905 5.1 23.5 Total 7,677 8,090 5.4 100.0 Source: Gartner (April 2011) ANALYSIS Overall Market Segment Performance Analysis Gartner defines retail vertical-specific software (VSS) as software applications unique to the retail vertical market. These are stand-alone applications that are not modules or extensions of horizontal applications. Merchandising and point of sale (POS) software are both good examples of retail vertical-specific software (see "Market Definitions and Methodology Guide: Vertical Industries"). This report includes only the retail VSS as part of the market share analysis. 2010 was similar to 2009 for retail VSS with no single software vendor dominating the fragmented retail software market. The retail industry has historically been very comfortable operating in a best-of-breed software environment, where needed functionalities are cobbled together to create an IT architecture. This meant retailers had numerous vendors side by side in their technology stacks. This means vendors need to compete in every deal as opposed to developing exclusive
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relations with a retailer; therefore, it is very unlikely any one or even two vendors will dominate in the near future. The top five vendors represent 10% of the market, which grew 5% worldwide in 2010. The 5% growth is evidence that the retail industry is gradually recovering from the recession. Retail spending was $8.0 billion in 2010, evidence that retailers are investing cautiously as their bottom lines improve, but they are wary of potential pullbacks in consumer spending as the global economy continues its uneven recovery. Wary does not mean that retailers didn't drive new investment, but instead, they made better, well-thought-out strategic investments with careful consideration to ROI and functionality requirements, such as social media and mobile applications. Worldwide, the North American region accounted for the bulk of software sales to the retail market, with 49% of spending. The consumption pattern in the retail industry in Latin America changed rapidly, and spurred a double-digit-growth opportunity for vendors of retail VSS, with a growth of 15% in 2010. Economic development and increases in purchasing power have expanded the focus from household consumption to personal consumption. Top Vendors Analyzed In the following section, we provide a brief analysis of the performance of the top five software vendors and their growth in 2010. SAP Continues to Leverage Its End-to-End Support of Retailer's Ecosystems SAP's retail solution portfolio targets grocery, hardline and softline retailers with solutions designed to help drive profitable multichannel retailing through insight into shopper behavior and business, improving operational efficiency and increasing flexibility to capitalize on growth opportunities. The company's VSS revenue grew by 10%, mainly because of their Integrated Merchandising and Marketing solutions and their Demand Driven Supply networks solutions. The former includes: shopper insight; merchandise and assortment; life cycle pricing; marketing and promotions; and loyalty management. The latter includes integrated demand and replenishment planning. Retailers have invested aggressively in improving their forecasting and merchandising capability. Ongoing Gartner surveys indicate this focus will continue for the next few years. SAP is poised to take advantage of this trend. However, given the aggressive competition with Oracle, SAP's closest competitor, it is unlikely that SAP will become dominant in this space. SAP's large and active installed base, dedicated retail business unit and active sponsorship in industry events, such as the National Retail Federation (NRF) convention, contributed to its No. 1 market share position. Oracle's Retail Software Drives Growth in 2010 Oracle's Retail Global Business Unit houses its retail-specific software. Assets include: merchandise management, merchandise planning and optimization, supply chain planning, supply chain execution for retail; store and multichannel retailing: and customer relationship management (CRM) for retailing. Oracle grew its retail VSS revenue 8.9% as a result of its go-to- market strategy of offering complete, open and integrated portfolios of retail-specific, business- centric software solutions that integrate easily with the rest of its footprint, including corporate administration, enterprise infrastructure, middleware, database and hardware solutions. Oracle positioned itself to capitalize on retailers' planned investments around merchandising, in- store technology and business intelligence (BI). From bases in North America and Europe, it has expanded aggressively into Latin America and Asia/Pacific. Oracle has invested aggressively in
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thought leadership efforts, including: customer advisory boards; its Retail Industry Strategy Council; Oracle Retail CrossTalk, its retail industry event; and Oracle OpenWorld. Another strategic 2010 iniative includes Oracle's 2010 announcement to acquire Art Technology Group. The acquisition was subsequently closed in January 2011. Retalix Penetration of High-Volume High-Complexity FMCG Contributes to Industry Growth Retalix grew by 10.3%, for VSS, with its retail VSS marketed to fast-moving consumer goods (FMCG) retailers and distributors worldwide. Retalix specializes in: grocery chains; independent grocers; convenience and fuel retailers; drug and department store chains; and food, beverage and consumer packaged goods distributors. Retalix uses a combination of direct, partnership, dealer and indirect sales channels. Retalix's initial strength had come from in-store operations, mostly POS. However, long-term growth will need to come from merchandising management and supply chain as the POS refresh cycle begins to slow down in the next couple of years. Retalix has a potential advantage with its ability to service Tier 2, Tier 3 and even Tier 4 through its indirect sales channel strategy. That's a capability many of its competitors don't have. SAS Experiences Double-Digit Revenue Growth for Vertical-Specific Software SAS's retail VSS revenue for 2012 was $30.4 million, which was a 12% increase over 2009. This revenue includes on SAS retail merchandising solutions, not the horizontal solutions sold to retailers. SAS's loyal retail team provides retail VSS across all retail market segments, including: apparel; fashion; grocery; specialty retail; general merchandise; online; and hardline retail. The company's retail focus is mainly outside of VSS with enterprise retail intelligence solutions. With high levels of expertise in loss prevention, allocation, merchandise planning and marketing and customer support. SAS benefited from the revived North American retail IT landscape. Retailer investment around e- commerce, campaign management, analytics and loss prevention will drive new software sales. However, the top five rankings did not shift because of this new activity. NCR's Growth of 4.5% Results in Expanded Efforts in Latin America NCR's retail VSS experienced slow growth in 2010 of 4.5%. NCR has entered into the Latin American market in 2010, and, while the Latin American region did well, it wasn't enough to overcome the slower-moving U.S. market. NCR describes its retail solutions as the converged experience, helping companies interact, transact and connect with their customers in revolutionary ways. They continue to move from a business-to-consumer (B2C) model to a consumer-to-business (C2B) approach. The move beyond multichannel to a seamless "converged retailing," or "c-tailing," experience encompasses stores, the Internet, self-service touchpoint and mobile devices. This messaging is definitely in line with retailers' worldwide focus on transforming the in-store experience. Retailers are increasingly investing their capabilities around mobility and social media, attempting to bring these experiences into the store. The 2011 Gartner/RIS News retail tech study indicated the No. 1 initiative for North American retailers is adding new stores. That focus will certainly help NCR drive hardware sales around its core products of kiosks and POS, as well as software sales around POS, marketing and loyalty.
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Mergers and Acquisitions M&A activity that has a significant impact on the technology and service providers identified in Table 1 for 2010 and 2011. Table 3. M&As for the Top Five Retail Vertical-Specific Software Vendors, 2010 Company Name M&A Activity NCR October 2010 NCR acquired Mobiqa, a global pioneer and market leader in the delivery of mobile optimized content and a provider of tickets, boarding passes, downloadable applications and coupons in the travel, entertainment and retail sectors. Oracle January 2011 Oracle enters into a strategic agreement to acquire Art Technology Group (ATG). Source: Gartner (April 2011) RECOMMENDED READING Some documents may not be available as part of your current Gartner subscription. "Market Definitions and Methodology Guide: Vertical Industries, 2010" "Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2008-2014, 2Q10 Update" "Competitive Landscape: Retail Software, Transforming the Business in 2010 and Beyond" Evidence Gartner uses public sources of information, primary research surveys and discussions with software vendors to establish estimates for this market. Information from Gartner's secondary research and internal community meetings has also been used to arrive at certain conclusions. The data in this research report is published as Gartner estimates/opinion, not as facts that the vendor reported. This document is published in the following Market Insights: Industry Market Strategies Worldwide
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